Google Follows Microsoft Playbook in Boosting Spending

By Jonathan D. Salant and Jeff Bliss -
Oct 20, 2011

Google Inc. (GOOG), the subject of a
Federal Trade Commission investigation, has ratcheted up its
lobbying to the level of another high-tech company that also
faced government scrutiny: Microsoft Corp. (MSFT)

Mountain View, California-based Google spent $5.9 million
from Jan. 1 to Sept. 30, a 51 percent increase over the $3.9
million spent during the same period a year earlier, according
to reports filed today with the House and Senate. Microsoft
spent $5.5 million in the first nine months of 2011, up from
$5.2 million during the same period in 2010. Google’s lobbying
team included 23 outside firms, up from six a year earlier and
one more than Microsoft.

Google has doubled its lobbying spending in the last two
years and this year began an expansion of its political action
committee, which is used to give donations to candidates. Both
of these developments come as the owner of the world’s most
popular search engine faces scrutiny from both federal
regulators and U.S. lawmakers. The actions are similar to those
taken by Redmond, Washington-based Microsoft, one of Google’s
biggest competitors, after it faced a Justice Department
antitrust suit and congressional hearings in the 1990s.

“When scrutiny arrived, Microsoft chose to ramp up its
lobbying presence and let the professionals handle its
concerns,” said Rogan Kersh, associate dean of New York
University’s Wagner School, who tracks lobbying. “That’s the
blueprint that Google is successfully following.”

Pitching Google’s View

The lobbying expenditures are part of an effort to give
Congress and the Obama administration Google’s view on an array
of issues, said Samantha Smith, a company spokeswoman.

“We want to help policy makers understand our business and
the work we do to keep the Internet open, to encourage
innovation and to create economic opportunity,” she said in a
statement. “Lobbying is a part of that process.”

Google first registered to lobby in Washington in June 2007
and spent $2.9 million in the first nine months of 2009.
Microsoft spent $5 million during the same period that year.

“We see this transition happen in every sector,” Kersh
said. There’s “an initial resistance to lobbying followed by a
recognition that whatever your business model, you have to have
an active lobbying presence, both to stave off regulation and to
gain benefits from government.”

Google’s lobbying team now includes Richard Gephardt, a
former House Democratic leader; Kyle Simmons, former chief of
staff to Senate Republican leader Mitch McConnell; and Charles Black Jr., the former Republican presidential adviser who now is
chairman of the Washington-based Prime Policy Group lobbying
firm. All were hired in June.

Hiring Spree

The company’s hiring spree “shows how concerned they are
with regulatory matters,” said Benjamin Schachter, an Internet
analyst at Macquarie Capital in New York. “They’ve grown up and
realized they have to have their voice heard so they’re not
backed into a corner.”

An enhanced lobbying presence won’t affect the
investigation at the FTC, whose probes have been resistant to
political pressure, said William Blumenthal, the agency’s former
general counsel.

“It is extraordinarily rare when you’d see political
intervention have a significant effect on the outcome of the
investigation,” said Blumenthal, chairman of the U.S. antitrust
group at Clifford Chance LLP in Washington.

Microsoft Probe

An increased lobbying presence didn’t shield Microsoft from
the Justice Department’s antitrust probe of the company. The
government pressured Microsoft into accepting a nine-year
consent decree to stop using its monopoly Windows operating
system for personal computers to quash competition. The decree
expired in May.

In line with Microsoft’s past spending pattern, Google also
increased the amount of money it spends on politics. Its PAC,
which began in 2006, raised $570,115 from employees during the
first six months of 2011, 12 times greater than the $47,769
raised during the same period in 2009, Federal Election
Commission records show. Microsoft’s PAC took in $546,784 from
January to June, slightly more than the $534,530 raised two
years earlier.

The FTC earlier this year began investigating whether
Google has violated antitrust laws by unfairly ranking search
results to favor its own businesses and increasing rivals’ ad
rates, a person familiar with the probe said.

The agency also is examining if Google is using its control
of the Android mobile operating system to discourage smart-phone
makers from using rivals’ applications and services, said the
person, who wasn’t authorized to comment.